Actually, debt does matter. It’s a problem, and those arguing for austerity out of more than just an innate hatred of the state and all its works are not tilting at windmills. While we may not be “drowning in debt,” there are many folks out there who are concerned that we will do a bit more than just get our feet wet if we are not careful. Carmen Reinhardt and Kenneth Rogoff’s much-cited paper, “Growth in a Time of Debt,” argues that government debt above a critical threshold of 90 percent can become a substantial drag on the economy.17 This claim is not without its critics, but notwithstanding those criticisms, the basic point can be rephrased as, why would any state want to carry and pay for such a debt load if it didn’t have to?18 Looking to the longer term, Simon Johnson and James Kwak argue that “America does face a long-term debt problem” that breeds a political climate of “hysteria, demagoguery and delusion,” which over the long haul leads to cuts that most affect “the people who can afford it least.”19 The end result, assuming that the United States doesn’t suffer an interest-rate shock in the short run, is that “the United States will look like the stereotypical Latin American country, with the super-rich living in private islands … a comfortable professional class … and a large, struggling lower class.”20 One could observe cynically that we are pretty much already there, but the point is once again well taken.

By that time global oil supplies may have run out, and the last thing we may care about is sovereign debt.
26. “Budget of the United States Government, Fiscal Year 2002,” Executive Office of the President of the United States, 224, table S. 2, http://www.gpo.gov/fdsys/pkg/BUDGET-2002-BUD/pdf/BUDGET-2002-BUD.pdf.
27. Alberto Alesina, “Tax Cuts vs. ‘Stimulus’: The Evidence Is In,” Wall Street Journal, September 15, 2010, Opinion; Carmen M. Reinhart and Kenneth S. Rogoff “Growth in a Time of Debt,” American Economic Review, 100, 2 (2010): 573–578.
28. Timothy Noah, “Introducing the Great Divergence,” Slate, September 3, 2010, Part of a series entitled “The United States of Inequality,” http://www.slate.com/articles/news_and_politics/the_great_divergence/features/2010/the_united_states_of_inequality/introducing_the_great_divergence.html.
29. See US Census Bureau website, http://www.census.gov/hhes/www/poverty/about/overview/index.html, accessed September 19, 2011.
30.

The leader of the Green group in the Bundestag, Jürgen Trittin, described Rösler’s remarks as “amateurish” and said they demonstrated that a “novice was in charge in the economics ministry”. The stock markets will react’ (Thielemann, ‘Das Ende der Demokratie’, p. 820).
72 Presumably this is so only beneath a certain level of debt. An influential expert view is that 80 per cent of GDP is the threshold beyond which the public debt hinders future growth (C. Reinhart and K. Rogoff, Growth in a Time of Debt, NBER Working Paper No. 15639, Cambridge, MA: National Bureau of Economic Research, 2009). If this is true – like all econometric ‘laws’, it should be treated with utmost caution – many developed economies are already incapable of growth.
73 See a few thoughts on the subject in chapter 4 below.
74 In combination with low interest rates, capital controls and high inflation, this may add up to a public debt reduction strategy.

Alan Taylor, ‘When is the Time for Austerity?’, 20 July 2013, Vox, http://www.voxeu.org/article/when-time-austerity.
22. These arguments were developed in Martin Wolf, ‘How Austerity has Failed’, The New York Review of Books, vol. LX, no. 12, 11 July–4 August 2013, pp. 20–22, http://www.nybooks.com/articles/archives/2013/jul/11/how-austerity-has-failed/?pagination=false.
23. Carmen M. Reinhart and Kenneth Rogoff, ‘Growth in a Time of Debt’, National Bureau of Economic Research Working Paper No. 15639, January 2010, www.nber.org.
24. Thomas Herndon, Michael Ash and Robert Pollin, ‘Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff’, 15 April 2013, http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_301-350/WP322.pdf.
25. International Monetary Fund, World Economic Outlook, April 2013, Fig. 1.1.2.
26.

…

‘A Step in the Dark: Unconventional Monetary Policy after the Crisis’, Andrew Crockett Memorial Lecture, Bank for International Settlement, 23 June 2013. http://www.bis.org/events/agm2013/sp130623.pdf.
Reinhart, Carmen M. and Kenneth S. Rogoff. This Time is Different: Eight Centuries of Financial Folly (Princeton and Oxford: Princeton University Press, 2009).
Reinhart, Carmen M. and Kenneth S. Rogoff. ‘Growth in a Time of Debt’, National Bureau of Economic Research Working Paper No. 15639, January 2010. www.nber.org.
Report of the Parliamentary Commission on Banking Standards. Changing Banking for Good: Volume 1. Summary, and Conclusions and Recommendations, 12 June 2013. http://www.parliament.uk/business/committees/committees-a-z/joint-select/professional-standards-in-the-banking-industry/news/changing-banking-for-good-report.

Psychologists have shown that debt adversely affects mental health and mental alertness and leads to a more passive and conservative mindset.36 Insecurity associated with debt makes people less resilient and less resourceful. Having large numbers of people deeply in debt and exposed to circumstances that make indebtedness more likely is also chipping away at freedom, which requires non-domination by external pressures.
NOTES
1 ‘The never-ending story’, The Economist, 20 November 2015, p. 13.
2 C. Reinhart and K. Rogoff, ‘Growth in a Time of Debt’, NBER Working Paper No. 15639 (Cambridge, MA: National Bureau of Economic Research, 2010).
3 T. Herndon, M. Ash and R. Pollin, Does high public debt consistently stifle economic growth? A critique of Reinhart and Rogoff (Amherst: Political Economy Research Institute, University of Massachusetts, 2013).
4 A. Pescatori, D. Sandri and J. Simon, ‘Debt and Growth: Is There a Magic Threshold?’

Portsmouth’s predicament compares starkly with the current approach favoured by its south-coast neighbours, Southampton, of building up the side over time.
3 Margot Finn (2003) The Character of Credit: Personal Debt in English Culture, 1740–1914, Cambridge University Press.
4 McKinsey Global Institute (2010) ‘Debt and Deleveraging: The Global Credit Bubble and its Economic Consequences’, report.
5 Carmen Reinhart and Kenneth Rogoff (forthcoming) ‘Growth in a Time of Debt’, prepared for the American Economic Review Papers and Proceedings.
6 McKinsey Global Institute (2010) ‘Debt and Deleveraging: The Global Credit Bubble and its Economic Consequences’, report.
7 Richard Koo (2008) The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession, John Wiley & Sons.
8 Robert Chote, Carl Emmerson and Jonathan Shaw (eds) (2010) The Green Budget 2010, Institute for Fiscal Studies.
9 Ken Coutts and Robert Rowthorn (2009) ‘Prospects for the UK Balance of Payments’, University of Cambridge Centre for Business Research Working Paper No. 394.
10 Kenneth Rogoff (2003) ‘Globalisation and Global Disinflation’, presented to the Conference on Monetary Policy and Uncertainty: Adapting to a Changing Economy, Federal Reserve Bank of Kansas City.
11 Olivier Blanchard and John Simon, ‘The Long and Large Decline in US Output Volatility’, Brooklyn Papers on Economic Activity 1 (2001): 135–64.
12 On similar themes, see Jonathan McCarthy and Egon Zakrajsek (2003) ‘Inventory Dynamics and Business Cycles: What Has Changed?’

That is why consistent and carefully calibrated fiscal consolidation remains necessary in Europe.” http://ec.europa.eu/commission_2010-2014/rehn/documents/cab20130213_en.pdf
203 Eurostat, general government consolidated gross debt. Code: tsieb090. In the eurozone as a whole this was 85.4 per cent of GDP in 2010, 87.3 per cent in 2011 and 90.6 per cent in 2012.
204 Carmen Reinhart and Kenneth Rogoff, "Growth in a Time of Debt", NBER working paper 15639, January 2010
205 http://www.nextnewdeal.net/rortybomb/guest-post-reinhartrogoff-and-growth-time-debt
206 A point eloquently made by Adam Posen here: http://www.ft.com/cms/s/0/a6d94b02-a774-11e2-9fbe-00144feabdc0.html
207 Thomas Herndon, Michael Ash and Robert Pollin, "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff", 15 April 2013.

Brown (Chicago: University of Chicago Press, 2010), pp. 35–68.
57 See, for example, Dean Baker, “The Myth of Expansionary Fiscal Austerity,” Center for Economic and Policy Research, October 2010, available at http://cepr.net/documents/publications/austerity-myth-2010-10.pdf; and Arjun Jayadev and Mike Konczal, “The Boom Not The Slump: The Right Time For Austerity,” Roosevelt Institute, 2010, available at http://scholarworks.umb.edu/cgi/viewcontent.cgi?article=1026&context=econ_faculty_pubs.
58 See, for example, International Monetary Fund, “Will It Hurt? Macroeconomic Effects of Fiscal Consolidation,” chapter 3 in 2010 World Economic Outlook.
59 Eurostat figures for the eurozone for March 2016.
60 See, for example, International Monetary Fund, “Will It Hurt?”
62 Carmen M. Reinhart and Kenneth S. Rogoff, “Growth in a Time of Debt,” American Economic Review 100, no. 2 (May 2010): 573–78.
62 By now, there is a large literature on the subject. See, for example, Thomas Herndon, Michael Ash, and Robert Pollin, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” Cambridge Journal of Economics 38, no. 2 (2014): 257–79; Ugo Panizza and Andrea F. Presbitero, “Public Debt and Economic Growth: Is There a Causal Effect?